Given that there are almost 46.5 million voters in the UK and 8.8 million (roughly one in five) of them have debt problems, it always strikes us that governments do not pay enough attention to the problems of people in debt.
If everyone in debt made their voices heard the politicians would have to listen, but what do we think five years of Conservative government will mean for people struggling with personal debt?
Debt problems may rise
Lots of people think, despite austerity policies, that the economy will continue to grow. If that happens the banks will become more confident and, despite the FCA insisting on careful and stringent affordability criteria, more people will get loans. Inevitably some of these will struggle.
Perhaps a much bigger source of debt problems will be a rise in interest rates for mortgages. This may not happen tomorrow but when it does it will cause big problems for already stretched families.
Benefit cuts and debt advice
The biggest worry could be the impact of benefit cuts on the poorest families. Many of these are the “hard-working families” we heard so much about during the election. Lots of these receive benefits as a component of their income and many of them are already struggling to make ends meet.
When benefit cuts bite we could see a big increase in the number of people who need debt advice.
Will they get it? Possibly not. The free to client advice sector is already massively outperforming its historical debt advice figures, on a level of resource that hasn’t changed much in the last few years. And without being given much more money by the Money Advice Service (MAS – the sector’s principal funder) it isn’t likely to be able to do much better. We don’t think they will get the money they need.
At the same time we know that FCA regulation will create a fee-charging industry that is fit for purpose, though probably smaller than the one we have now.
So the future may see rising demand for debt advice and fewer resources to deal with that demand. And remember that only 2 out of 10 people with debt problems are trying to do anything about it.
So we have a big crisis. One that has been here for years and ignored for years. A problem that economic success and public policy will combine to make worse.
The Conservatives said they will back financial inclusion in their manifesto. If they were to appoint a minister for financial inclusion (as they have said they might) the minister must consider the debt problems of poorer people, but this minister will not look at the debt problems suffered by those on average incomes and above – and there are many thousands in this group failing to make ends meet.
Free or fee debt advice and support?
It is time to recognise that the free to client sector deals with more vulnerable people with fewer resources and does this job well. The fee-charging sector deals with people who make an informed choice to pay, or who are less vulnerable and tend to have better resources for dealing with debt.
We should spend less time treading on each other’s toes and more time working together on persuading the people in power that consumer debt is a really important issue.